Xerxes Posted April 9, 2020 Share Posted April 9, 2020 So much for diversifying their oil industry risk. Agreed. I think though it more of an opportunistic buy on an asset class they know well. Small bet though. The whole bet is at $1 billion on the four o&g companies. In contrast, they gave about $45 billion to Masa Son's vision fund through equity and pref equity. On a different note, interestingly Norway sovereign fund, in contrast to 2018 where it was buying the dip, as been off loading its equity to fulfill its obligation with its government. Link to comment Share on other sites More sharing options...
james22 Posted April 9, 2020 Author Share Posted April 9, 2020 So much for diversifying their oil industry risk. Agreed. I think though it more of an opportunistic buy on an asset class they know well. Small bet though. The whole bet is at $1 billion on the four o&g companies. In contrast, they gave about $45 billion to Masa Son's vision fund through equity and pref equity. On a different note, interestingly Norway sovereign fund, in contrast to 2018 where it was buying the dip, as been off loading its equity to fulfill its obligation with its government. I agree it was smart. It'll always be a temptation to trade the asset class they know (and can manipulate). Maybe nothing wrong with that, but wonder if they've only recently come to the realization? Link to comment Share on other sites More sharing options...
Dalal.Holdings Posted April 9, 2020 Share Posted April 9, 2020 Smells like insider trading to me but for a whole nation. Step 1 Pump as much oil as possible dropping oil prices and oil stocks Step 2 Cut production and get the upside when the stocks rebound That’s why price fixing and collusion are not allowed in places like U.S...the problem arises when you also produce a commodity that is produced by a cartel in other places. Link to comment Share on other sites More sharing options...
SharperDingaan Posted April 9, 2020 Share Posted April 9, 2020 It also tells you that the cuts are expected to go a lot higher than 10M bbl/d, and that these companies are probably amongst the major beneficiaries. Look at where their major production is from, and what those production costs are ::) SD Link to comment Share on other sites More sharing options...
Dalal.Holdings Posted April 9, 2020 Share Posted April 9, 2020 https://www.bnnbloomberg.ca/occidental-seeking-federal-lifeline-for-u-s-oil-industry-1.1419703 Occidental Petroleum Corp. wants U.S. government financial aid for the oil industry even as the biggest producer of Permian Basin crude urges Texas regulators not to interfere with market forces. Welcome to the new "free market" economic model: where bankruptcies are a thing of the past! Clearly Oxy's horrid balance sheet is none of its own fault! Link to comment Share on other sites More sharing options...
Spekulatius Posted April 9, 2020 Share Posted April 9, 2020 https://www.bnnbloomberg.ca/occidental-seeking-federal-lifeline-for-u-s-oil-industry-1.1419703 Occidental Petroleum Corp. wants U.S. government financial aid for the oil industry even as the biggest producer of Permian Basin crude urges Texas regulators not to interfere with market forces. Welcome to the new "free market" economic model: where bankruptcies are a thing of the past! They would be stupid not to to ask for it in the current environment. Has anyone asking for a bailout been rejected? Link to comment Share on other sites More sharing options...
Dalal.Holdings Posted April 9, 2020 Share Posted April 9, 2020 https://www.bnnbloomberg.ca/occidental-seeking-federal-lifeline-for-u-s-oil-industry-1.1419703 Occidental Petroleum Corp. wants U.S. government financial aid for the oil industry even as the biggest producer of Permian Basin crude urges Texas regulators not to interfere with market forces. Welcome to the new "free market" economic model: where bankruptcies are a thing of the past! They would be stupid not to to ask for it in the current environment. Has anyone asking for a bailout been rejected? Nope, hence our new economic model. Anadarko was clearly worth every penny to Oxy... Let's let every corporation know henceforth that the gov't will be there to backstop them if any "unforeseen" event takes place in the future. The government has become a giant insurance co that collects no premiums! Edit: and the corporate debt purchases are only for bonds that were investment grade prior to March 22 (not Oxy), so yes—the gov’t has more or less said no to junk rated companies. Link to comment Share on other sites More sharing options...
SharperDingaan Posted April 10, 2020 Share Posted April 10, 2020 https://www.bnnbloomberg.ca/occidental-seeking-federal-lifeline-for-u-s-oil-industry-1.1419703 Occidental Petroleum Corp. wants U.S. government financial aid for the oil industry even as the biggest producer of Permian Basin crude urges Texas regulators not to interfere with market forces. Welcome to the new "free market" economic model: where bankruptcies are a thing of the past! They would be stupid not to to ask for it in the current environment. Has anyone asking for a bailout been rejected? They are just trying to do petro-dollar recycling. Give us the money, to buy out the repo'd shale debt (re-cycle), that we'll swap into equity. We'll take the leases over, and shut the field in. Free market at work, SD Link to comment Share on other sites More sharing options...
Dalal.Holdings Posted April 11, 2020 Share Posted April 11, 2020 https://www.bloomberg.com/news/articles/2020-04-10/the-unexpected-holdout-to-a-global-oil-production-deal One of the most dramatic global oil production agreements in history has been left hanging on the approval of an unlikely character: Mexican President Andres Manuel Lopez Obrador.... AMLO’s position was also strengthened by its sovereign oil hedge, the largest of its kind, which protects the government’s budget against crude prices falling below $49 a barrel this year... Still, the president called the production cuts “temporary” and said Pemex will continue extracting oil. Link to comment Share on other sites More sharing options...
JRM Posted April 11, 2020 Share Posted April 11, 2020 This deal does not fix the demand crush due to the coronavirus. I doubt we see $50 oil anytime soon, at least not for a sustained period. Remember there is a ton of oil sitting in storage currently that must be worked through. Link to comment Share on other sites More sharing options...
Xerxes Posted April 11, 2020 Share Posted April 11, 2020 So much for diversifying their oil industry risk. Agreed. I think though it more of an opportunistic buy on an asset class they know well. Small bet though. The whole bet is at $1 billion on the four o&g companies. In contrast, they gave about $45 billion to Masa Son's vision fund through equity and pref equity. On a different note, interestingly Norway sovereign fund, in contrast to 2018 where it was buying the dip, as been off loading its equity to fulfill its obligation with its government. I agree it was smart. It'll always be a temptation to trade the asset class they know (and can manipulate). Maybe nothing wrong with that, but wonder if they've only recently come to the realization? There has been an internal tug of war I think within PIF, Aramco etc as to how best invest. With MBS pushing more for Unicorn investments (Vision fund, Uber and Tesla) and the old guard pushing for more earthly ideas. I recall an article on WSJ from last year that was talking about how investments in solar energy had a lot of opposition from than Aramco chair (he lost his job mid-2019). Now with PIF selling out Tesla before its monster rally, abundance of bargains in the old economy and not committing to Vision Fund 2 to me that means the pendulum has swung back in favour of earthly ideas. That said, I think they will keep Uber. I realize that Uber gets lots of flak as one of the larger unicorns. Personally I believe in Dara, the super app potential that Uber has and the portfolio of optionality it has. Link to comment Share on other sites More sharing options...
jmp8822 Posted April 11, 2020 Share Posted April 11, 2020 Does anyone want to speculate on how many bankruptcies this will cause in the oil sector? I'm trying to process through the probabilities of a handful of bankruptcies and dozens and dozens of bankruptcies. More specifically, I'm trying to solve how much midstream players will be effected and how many bankruptcies that could lead to in midstream. Link to comment Share on other sites More sharing options...
bizaro86 Posted April 11, 2020 Share Posted April 11, 2020 Does anyone want to speculate on how many bankruptcies this will cause in the oil sector? I'm trying to process through the probabilities of a handful of bankruptcies and dozens and dozens of bankruptcies. More specifically, I'm trying to solve how much midstream players will be effected and how many bankruptcies that could lead to in midstream. The market definitely seems to be pricing in significant bankruptcies. Midstream valuations only make sense in that light. And I was able to buy CVE bonds at less than fifty cents on the dollar fairly recently. They're up to 65, but that isnt exactly a ringing endorsement. Link to comment Share on other sites More sharing options...
SHDL Posted April 11, 2020 Share Posted April 11, 2020 The big US banks seem to be getting ready for it: https://www.reuters.com/article/us-usa-banks-energy-assets-exclusive-idUSKCN21R3JI Link to comment Share on other sites More sharing options...
LC Posted April 13, 2020 Share Posted April 13, 2020 https://www.reuters.com/article/us-global-oil-opec/opec-russia-approve-biggest-ever-oil-cut-to-support-prices-amid-coronavirus-pandemic-idUSKCN21U0J6 OPEC+ sources said they expected total global oil cuts to amount to more than 20 million bpd, or 20 percent of global supply, effective May 1. Link to comment Share on other sites More sharing options...
Xerxes Posted April 13, 2020 Share Posted April 13, 2020 https://www.reuters.com/article/us-global-oil-opec/opec-russia-approve-biggest-ever-oil-cut-to-support-prices-amid-coronavirus-pandemic-idUSKCN21U0J6 OPEC+ sources said they expected total global oil cuts to amount to more than 20 million bpd, or 20 percent of global supply, effective May 1. It should be clarified the voluntary actuals cuts are way below that number. the rest of the so-called "cuts" are economically driven cuts by higher-cost producers that no longer have a viable option. Bottom line I guess it doesn't matter, the Kingdom and Kremlin's intend was to have some supply-side destruction through economically driven cuts by higher-cost producers. 5 years down the line, I suspect the duo will be looking at a much larger, centralized U.S.-based oil and gas industry. Link to comment Share on other sites More sharing options...
plato1976 Posted April 13, 2020 Share Posted April 13, 2020 why much larger? https://www.reuters.com/article/us-global-oil-opec/opec-russia-approve-biggest-ever-oil-cut-to-support-prices-amid-coronavirus-pandemic-idUSKCN21U0J6 OPEC+ sources said they expected total global oil cuts to amount to more than 20 million bpd, or 20 percent of global supply, effective May 1. It should be clarified the voluntary actuals cuts are way below that number. the rest of the so-called "cuts" are economically driven cuts by higher-cost producers that no longer have a viable option. Bottom line I guess it doesn't matter, the Kingdom and Kremlin's intend was to have some supply-side destruction through economically driven cuts by higher-cost producers. 5 years down the line, I suspect the duo will be looking at a much larger, centralized U.S.-based oil and gas industry. Link to comment Share on other sites More sharing options...
Xerxes Posted April 14, 2020 Share Posted April 14, 2020 why much larger? https://www.reuters.com/article/us-global-oil-opec/opec-russia-approve-biggest-ever-oil-cut-to-support-prices-amid-coronavirus-pandemic-idUSKCN21U0J6 OPEC+ sources said they expected total global oil cuts to amount to more than 20 million bpd, or 20 percent of global supply, effective May 1. It should be clarified the voluntary actuals cuts are way below that number. the rest of the so-called "cuts" are economically driven cuts by higher-cost producers that no longer have a viable option. Bottom line I guess it doesn't matter, the Kingdom and Kremlin's intend was to have some supply-side destruction through economically driven cuts by higher-cost producers. 5 years down the line, I suspect the duo will be looking at a much larger, centralized U.S.-based oil and gas industry. The resources in the Permian basin are there and wont disappear because the Saudi market share strategy; the small E&P players, companies themselves, holding those assets may go bankrupt being unable to utilize the assets, but those assets can easily move under a stronger name through consolidation. In time, the short term gain of wiping out smaller U.S. E&P players would mean a larger player consolidating on the other end. Link to comment Share on other sites More sharing options...
rb Posted April 14, 2020 Share Posted April 14, 2020 WOW! You know shit really hit the fan when an oilman gets introspective. No one wants to give us capital because we have all destroyed capital and created economic waste Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted April 15, 2020 Share Posted April 15, 2020 WOW! You know shit really hit the fan when an oilman gets introspective. No one wants to give us capital because we have all destroyed capital and created economic waste Glad someone is being honest, but hadn't this obvious in the shale field? Like it's been obvious that even at $60 most places weren't making enough for maintenance and new exploration to prove shale economic over the cycle. This is in spite of efficiencies and cost cuts from 2015/2016 bust. Link to comment Share on other sites More sharing options...
SharperDingaan Posted April 15, 2020 Share Posted April 15, 2020 They've been taken behind the woodshed, and for many of them - it's to be put down. Give them some space. Their leases are in the process of transferring to the majors, and discipline WILL be imposed. This is no different to consolidation in the gold, diamond, or oil fields of bygone eras. The little guys get snuffed, and the majors shut it in to protect their infrastructure investments elsewhere. Employment declines versus former levels, but significantly rises over current levels, and the displaced move on. Gut wrenching, but the best long-term outcome. SD Link to comment Share on other sites More sharing options...
opihiman2 Posted April 15, 2020 Share Posted April 15, 2020 WTI back to $20. Going to be a multi-decade bear market in oil. XOM just took on a HUGE ton of debt, and I wouldn't be surprised if they start cutting dividends. Link to comment Share on other sites More sharing options...
lnofeisone Posted April 16, 2020 Share Posted April 16, 2020 I don't even know what to say here. https://www.bnnbloomberg.ca/u-s-weighs-paying-drillers-to-leave-oil-in-ground-amid-glut-1.1422060 Link to comment Share on other sites More sharing options...
Jurgis Posted April 16, 2020 Share Posted April 16, 2020 I don't even know what to say here. https://www.bnnbloomberg.ca/u-s-weighs-paying-drillers-to-leave-oil-in-ground-amid-glut-1.1422060 Works for farmers, so why not! ::) Link to comment Share on other sites More sharing options...
SharperDingaan Posted April 16, 2020 Share Posted April 16, 2020 "The quicker solution would be to effectively reward drillers for taking a timeout. Under the approach being developed by the Energy Department, the agency would contract with companies to delay production of proven oil reserves for several years, if not indefinitely. When that crude is finally extracted and sold, the proceeds would go to the Treasury. Companies would be selected through an auction, with the government picking the lowest-price bidders." It just indicates how clueless the administration leadership actually is. We already have this process, it's called bankruptcy (market at work). The treasury just buys the leases out of bankruptcy, and sits on them indefinitely. No paying anybody, not to drill. SD Link to comment Share on other sites More sharing options...
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